- US CPI beats forecasts, FX traders yawn
- S&P futures gain, with rising European stocks and firmer crude prices
- UK Q2 GDP fell 21.7% but ignored by GBPUSD traders
- US dollar still higher compared to yesterday’s open, after rollercoaster ride overnight
Source: Saxo Bank/IFXA Ltd
FX Recap and outlook: US inflation data was higher than expected rising 0.6% m/m in July, matching the increase in June. Higher oil prices contributed to the gain but the results were ignored by FX markets.
The US dollar went for a wild, rollercoaster ride overnight, but the action is just noise. The greenback opened on a mixed note compared to yesterday’s closing levels but is well above yesterday’s NY opening levels. The Canadian dollar is the exception-it is unchanged.
Gold (XAUUSD) was the star of the show. Prices plunged from $1911.62 to $1863.50 in Asia. Prices have dropped 10.2%, peak-to-trough since last Thursday. Opportunistic traders took advantage of the move to reload positions. Fibonacci fans will have noticed that the XAUSUD plunge from August 6, stopped right at the 76.4% retracement level of the July 17-August 6 range. Prices bounced to 1949.31 in Europe, before slipping in early NY trading.
GBPUSD ignored a rash of economic data well bouncing in a 1.3019-1.3066 range. The UK economy suffered its worst recession ever with Q2 GDP falling 21.7% y/y. The news was well-telegraphed, expected, and therefore ignored. June Industrial Production and Manufacturing data were a tad better than expected.
EURUSD revered Asia losses and rallied from a low of 1.1712 to 1.1774 in early NY trading. Risk sentiment improved alongside Eurozone equity and S&P futures gains. Risk seeking traders are still clinging to hopes that the US Congress will enact another stimulus plan. President Trump musing about capital gains tax cuts didn’t hurt.
Coronavirus news helped sentiment. The US committed to buying $1.5 billion worth of the Modena COVID-19 vaccine.
USDJPY continues to be underpinned by rising US Treasury yields and higher Nikkei 225 prices. 10-year US Treasury Yields climbed to 0.673% from 0.638%, which helped take USDJPY from 106.46 to 106.88.
NZDUSD was hammered when the already dovish RBNZ, stepped up its game. The central bank left rates unchanged and raised their quantitative easing purchases from NZD 60 million/month to NZD 100 million. The move wasn’t unexpected. However, the Governor’s insistence of talking up the possibility of negative rates. NZDUSD sank to 0.6527 from 0.6576. Prices recovered to 0.6555 in NY.
AUDUSD dropped alongside broad US dollar strength and then recovered during the European and early NY sessions.
Oil prices firmed on the back of US dollar weakness and news of another decline in US crude inventories.
USDCAD tracked antipodean moves, and by the time NY opened, it was unchanged from where it opened on Tuesday. Price action continues to be at the mercy of US dollar sentiment and not domestic issues.US CPI is expected to rise 0.3% in July and unlikely to impact FX.
USDCAD Technicals: The intraday are mixed inside a narrow 1.3270-1.3370 band. A break above 1.3370 targets 1.3460 while a break of 1.3270 will lead to support in the 1.3210-40 area. For today, USDCAD support is at 1.3260, and 1.3230. Resistance is at 1.3320 and 1.3340. Today’s Range 1.3260-1.3320
Chart: USDCAD 4 hour
Source: Saxo Bank